House oversight panel wants FEMA to explain high flood insurance prices

WASHINGTON – The U.S. House committee charged with investigating government fraud and corruption demanded Monday that the Federal Emergency Management Agency detail just how its new flood insurance pricing system works.

In a letter delivered Monday night to FEMA Administrator Deanne Criswell, the House Committee on Oversight and Accountability gave FEMA until May 29 to turn over any records regarding the system, Risk Rating 2.0, that would help lawmakers "understand the premium calculations" that have increased rates, sometimes dramatically, for many of the 4.7 million Americans buying policies that pay for repairing water damage to individual homes and businesses.

"Homeowners, particularly those who are financially vulnerable, need affordable flood insurance policies to protect against catastrophic financial loss when future storms befall," wrote House Oversight Chair James Comer, R-Kentucky. "The process leading to the rate increases has been less than transparent."

The three-page letter demanding answers was written Friday but took until late Monday to finish after other House members asked to sign it – a process that required physically taking the letter to individual offices all over Capitol Hill. Fifty-one of the 435 House members from both parties and representing all regions of the country signed, including all six representatives from Louisiana.

Even before the new pricing methodology was to be rolled out in October 2021, Louisiana's congressional delegation and elected officials of both parties asked FEMA to disclose the factors that went into that formula. They suspect that features unique to Louisiana, such as levees protecting low-lying property, were not accurately considered.

"FEMA imposed the disastrous Risk Rating 2.0 before it was ready for prime time, and as a result families across Louisiana and throughout the nation are dealing with the devastating consequences. In my district, some premiums have skyrocketed from hundreds up to thousands of dollars," said Rep. Steve Scalise, the Jefferson Republican who as Majority Leader is the second highest ranking member of the U.S. House. Scalise, who is leading the effort to acquire the data, co-signed the letter.

What congressional lawmakers call FEMA's lack of transparency has long worried local Louisiana officials, including Dwayne Bourgeois, executive director of the North Lafourche Levee District. "We know there are holes in the formula FEMA is using to set Louisiana policyholders' premiums and unfortunately, we've raised the questions and they've gone largely unanswered," he said.

St. Charles Parish filed a lawsuit challenging the pricing methodology last week after being denied a public records request to review the data. "It is pricing people out of their homes and they can't even explain how they've calculated these premiums," said St. Charles Parish President Matthew Jewell.

The FEMA administrator in charge of the National Flood Insurance Program, however, said the agency has been clear about the pricing system's particulars. "We have done a good job of providing all the information someone needs to assess the program," David Maurstad testified Friday.

He added that while some officials focus only on the dramatic increases, about a million policyholders saw their premiums go down as a result of the new system.

Maurstad pointed out that only new policyholders would pay full price for flood insurance policies – sometimes double the previous cost – based on the individual property's risk of flooding. For those already holding flood insurance, the annual costs can only increase by 18%.

FEMA's new rules also require property owners to share information with new buyers about the property's flooding risk and the costs of insuring it over time.

Risk Rating 2.0 was an effort to make federally subsidized flood insurance more like a commercial product that links the price of premiums to payouts for damage.

Over its half-century in existence, the National Flood Insurance Program has routinely stressed its reserves and relied on federal taxpayers to cover recovery costs. The program is $20.5 billion in debt, to which a million dollars of interest accrues daily.

For years, Congress members from interior states have complained about having to routinely repair coastal properties. Particularly galling, in their view, were the roughly 350,000 properties that had been flooded more than once but that NFIP restored each time.

FEMA stated that Risk Rating 2.0 would use enhanced "technological and mapping capabilities to determine and communicate a property's full flood risk." For most Louisiana homeowners and businesses, the pricing methodology translated into paying a little more or a little less for the annual policies.

But for many living in low-lying and flood prone areas, premiums became so costly that homeowners and businesses couldn't afford the policies and their properties lost value. The congressional letter quoted Louisiana Insurance Commissioner Jim Donelon saying: "Without changes to the NFIP plan, these premium increases will cause many Louisiana policy holders – especially lower income households in the most flood-prone areas – to drop their flood insurance altogether."

"New Jersey has likely seen approximately 12,000 policy holders drop their policies since FEMA moved forward with Risk Rating 2.0 premium hikes and it is estimated that 80% of policy holders in the state will see rate increases," the letter stated.

Though some finance companies require flood insurance in order to mortgage properties, the purchase of flood insurance is voluntary.

NFIP is up for renewal later this year, and Congress is concerned that the program will become unsustainable, partially because higher-priced policies under the new methodology apparently has led to many to drop their policies.

In addition to all information and communications regarding Risk Rating 2.0, the committee demanded FEMA provide documents covering a dozen issues that go into calculating rates, including historical losses and risk exposures from 1992 to 2018; catastrophic modeling; consultations with the U.S. Army Corps of Engineers on levees; and state profiles. Additionally, the committee requested specific numbers on the number of policyholders payng more for flood insurance and of previous policyholders who dropped their coverage.

Though FEMA began looking at the new pricing methodology before Democratic President Joe Biden was inaugurated, the Republican-dominated committee requested the information from the start of his presidency. The committee has launched investigations into the U.S. withdrawal from Afghanistan and fraud in pandemic recovery spending but ended further investigations into Donald Trump and the January 6th riot at the U.S. Capitol.